London house prices 'to dip' as buyers drop to six-year low

London house prices could “dip” in coming months after the number of new buyer inquiries fell to a six-year low, property experts said today in their strongest warning yet.

Latest Nationwide Building Society figures showed annual house price rises across the UK slowing to nine per cent in October, down from 9.4 per cent the previous month.

The month-on-month change was a 0.5 per cent increase nationwide to an all-time high of £189,333 on average, reversing a 0.1 per cent month-on-month fall seen in September.

But Nationwide’s chief economist Robert Gardner said: “A variety of indicators suggest that the market has lost momentum. The number of mortgages approved for house purchase in September was almost 20 per cent below the level prevailing at the start of the year.

“Some forward-looking indicators, such as new buyer inquiries, suggest that activity may soften further in the near term, especially in London.”

He highlighted figures from the Royal Institution of Chartered Surveyors which showed the net balance for new buyer inquiries plunging in London to its lowest level in six years. RICS chief economist Simon Rubinsohn said: “Buyers have been put off by the sharp rise in prices in the capital and by the lack of fresh stock coming to the market.

“Fears over the rise in the cost of borrowing, coupled with banks tightening up on high loan to income mortgages have also contributed to the drop in buyer demand. We suspect that this picture will stabilise and it is possible prices will dip in the near term — but the chronic shortage of homes in the capital indicates that the falls will not be significant or long-term.”

This month the RICS reported more of its members saying house prices had fallen in the capital than had increased during September — the first occasion there had been such a monthly drop for nearly four years.

The Nationwide figures today did not include data by region. However, Mr Gardner stressed that broader economic indicators remained positive, with unemployment continuing to drop and mortgage rates falling back towards all-time lows.

“If the economy and the labour market remain in good shape, activity is likely to pick up in the quarters ahead — providing mortgage rates do not rise sharply,” he added.

In a sign of what is to come, the Bank of England yesterday reported that the number of mortgage approvals made to home buyers fell to a 14-month low in September.

Some experts have said this is evidence of the market becoming steadier after a strong burst of house-buying activity seen earlier this year.

But other commentators have predicted that with the wider national economy still picking up, the weaker patch of mortgage approvals will not last for long.

Stricter mortgage lending rules came into force earlier this year and these have caused some disruption to the market.

But in recent weeks there have been signs of lenders gaining a stronger appetite to do business and slashing the mortgage rates on offer in attempts to meet end-of-year lending targets.

Expectations about the prospect of a rise in the Bank of England base rate from its historic 0.5 per cent low, pushing up borrowing costs, also appear to have been pushed back.

The Bank of England’s chief economist Andy Haldane recently suggested that there will be no hike until well into next year.